How to get a lending license in Zimbabwe

How many lenders do you think Zimbabwe needs to close its USD 1.3 billion (approximately ZWL 75.4 trillion) credit gap? In 2023, Zimbabwe’s domestic credit to the private sector was approximately 8.76% of GDP, translating to about USD 2.33 billion (approximately ZWL 133.7 trillion). This reflects the amount of credit currently available in the market, but it’s not enough.

The total credit demand in the country is far higher. According to the African Development Bank (AfDB), Zimbabwe faces an annual financing gap equivalent to 13.4% of GDP, which amounts to about USD 3.7 billion (approximately ZWL 214.7 trillion).

This gap has major consequences: it limits businesses’ ability to grow, restricts individuals from accessing loans for critical needs, and ultimately stifles the country’s economic development.

While we may not know exactly how many lenders are needed to fully close this gap, each additional lender represents an opportunity to provide fair and accessible loans that could help to reduce the shortfall, even if just by a fraction.

But before you can become part of the solution, you need to understand the process of becoming a licensed lender in Zimbabwe. The journey begins with securing your lending license.

In this article, we’ll guide you through the steps to obtaining a lending license in Zimbabwe, so you can start your business and contribute to reducing this significant credit gap in the country.

Below are the steps you need to follow to obtain your lending license:

1. Understand the legal and regulatory requirements

Before applying for a lending license, it’s crucial to familiarize yourself with the legal framework governing lending activities in Zimbabwe. The primary laws that regulate lenders are the Microfinance Act and the Banking Act, both of which are enforced by the Reserve Bank of Zimbabwe (RBZ).

Additionally, you must be aware of the Zimbabwe National Credit Registry and comply with any provisions related to credit reporting and debt collection. It’s important to ensure your business complies with the Consumer Protection Act, which protects borrowers from unfair lending practices.

2. Register your business

Before applying for a license, your lending business must be legally registered with the Registrar of Companies. This includes choosing a business name and completing the necessary incorporation forms, such as:

• Registering your business with the Zimbabwe Companies Office.
• Selecting a business structure, such as a sole proprietorship, partnership, or limited company.
• Providing required documentation, including proof of identity for directors and shareholders.

After registering, you’ll need to apply for a Taxpayer Identification Number (TIN) and ensure your business is compliant with the Zimbabwe Revenue Authority (ZIMRA).

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3. Submit your application to the Reserve Bank of Zimbabwe (RBZ)

Once you register your business, you’ll need to submit an application for a lending license to the Reserve Bank of Zimbabwe (RBZ). The RBZ requires detailed documentation for your application, including:

• A formal application letter requesting approval for the license.
• Business plan outlining your business model, target market, loan products, risk management strategies, and financial projections.
• Details of the company structure, including ownership, directors, and shareholders.
• Proof of financial resources, showing that the business has sufficient capital to operate and provide loans. The RBZ may require a minimum capital threshold for your specific type of lending business.
• Risk management framework, which includes policies for loan defaults, collections, and financial monitoring.

4. Meet capital and financial requirements

One of the most important steps in the process is ensuring your business meets the capital requirements set by the RBZ.

For a Credit-Only Microfinance Institution (MFI), the RBZ mandates a minimum paid-up share capital of USD 25,000 or its equivalent in Zimbabwean dollars (ZWL$), as prescribed by the RBZ. The exact ZWL$ amount will fluctuate depending on the exchange rate, so make sure to calculate it at the time of your application.

For Deposit-Taking Microfinance Institutions (DTMFIs), the capital requirement is significantly higher, around USD 5 million.

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5. Pay licensing fees

Along with the application, you will need to pay the licensing fees. For local applicants (Zimbabwean companies), the fee for applying for a Credit-Only Microfinance Institution (MFI) license is a registration fee of USD 300 or the ZWL equivalent at the time of payment. This fee goes directly into the Reserve Bank Account (PL52041) via a cash deposit at the Reserve Bank or an RTGS transfer.

For foreign applicants, the application fee is the same amount, USD 300, and it can also be paid via a direct transfer into the Reserve Bank Account or deposited at the Reserve Bank banking halls.

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6. Provide evidence of sound governance and management

The RBZ places great importance on corporate governance and management quality. As part of the licensing process, you must demonstrate that your business has sound management practices in place, including:

• Experienced management: Key personnel should have experience in finance, lending, or risk management.
• Operational structure: Clearly outline the management hierarchy and responsibilities of key staff members.
• Compliance programs: You’ll need to show that you have the necessary internal controls, reporting mechanisms, and compliance procedures in place to adhere to regulatory requirements.

7. Undergo a background check

As part of the application process, the RBZ will conduct a thorough background check of the company’s directors, shareholders, and key personnel. This is to ensure that they have no criminal record, particularly for financial crimes or fraud, and have a good reputation in the financial industry.

You may need to submit additional documentation, such as personal identification, police clearance certificates, and financial history, to verify the integrity of the individuals involved in your business.

8. Wait for approval and inspection

Once your application is submitted, the RBZ will review your documentation and conduct an inspection of your business premises. This inspection will verify that your operations are set up correctly and that you are ready to start lending activities.

If your application is successful, the RBZ will issue you a lending license, which grants you the legal authority to operate as a lender in Zimbabwe. This license may come with conditions, such as regular reporting requirements, compliance checks, and audits.

Begin operations

Once you have received your license, you can officially start offering loans. At this point, you will need to implement your loan products, risk management strategies, and customer service procedures to ensure smooth operations.

Additionally, you will be required to regularly submit financial reports to the RBZ, maintain your capital adequacy, and comply with any other conditions set out in your license.

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